The Creso (ASX:CPH) share price fizzles despite new distribution deal

The Creso Pharma Ltd (ASX: CPH) share price has fallen late today after signing a North American sports distribution deal.

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View of hand holding pen signing new deal with glasses sitting on table next to contract papers

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The Creso Pharma Ltd (ASX: CPH) share price has been up and down today following a signed letter of intent (LOI) with ImpACTIVE.

At the time of writing, Creso shares are down 2.5% to 20 cents in late afternoon trade, after earlier peaking at 21 cents.

Let’s take a closer look at what Creso updated investors with.

What did Creso announce?

The Creso share price is rising after providing investors with plans to enter the growing North American sports and recreational market.

According to the release, Creso advised that it has entered a non-binding LOI with ImpACTIVE to distribute its CBD-based products. This includes the company’s CannaDOL and CannaQIX10 products which are expected to drive sales in the North American market.

Based in Canada, ImpACTIVE is a company that is focused on providing a range of CBD-based products for people suffering from muscle and joint inflammation. The use of its alternative health treatments negates the need for pharmaceutical drugs.

ImpACTIVE was formed by current and former high-profile athletes who saw a gap in the market for people struggling with injury.

Terms of the agreement

Under the LOI, both parties will commence formal discussions to enter a commercial agreement on or before 1 April 2021. While the terms of the contract are still being finetuned, the deal will see Creso’s products distributed through established sales channels across America and Canada.

Furthermore, Creso will be granted rights to become an authorised supplier of ImpACTIVE’s CBD roller application in Switzerland and Europe. This is also projected to launch around April 2021.

The company has its sights on targeting the sports and recreational sector by providing easy access to its products. In Switzerland alone, Creso has developed relationships with all key wholesalers, reaching over 2,100 points of sales. This comprises pharmacy networks, drugstores, specialised retailers as well as 400 sports and fitness centres.

The initial period of the contract will be set for 1-year and will automatically renew. Either party may cancel the agreement provided it is done within 90 days before the end of the term.

What did management say?

Creso’s commercial director Jorge Wernli commented on the partnership:

We are very proud to enter the sports and recreational market with such a high calibre partner as ImpACTIVE. This LOI is important for Creso Pharma, as it further broadens our international footprint and provides another large market opportunity.

We look forward to working with ImpACTIVE to ensure all products are well received in Europe and North America, and also leveraging their innovative product range to further add to the Company’s growing sales profile.

About the Creso share price

The Creso share price has performed relatively well over the past 12 months, jumping 192%. Although the company’s shares were mostly flat until last November, positive investor sentiment picked up after the landmark announcement that the UN had decided to reclassify cannabis as a less dangerous drug.

On current valuations, Creso has a market capitalisation of around $195 million.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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